What went wrong in the economics profession?

I've been putting off this topic but reactions to Krugman's essay don't seem to go away. Mark Thoma links to everyone. Here is a Krugman post,criticizing Chicago School economists. Via Greg Mankiw, David Levine offers the latest broadside. Here is Alexander Rosenberg criticizing John Cochrane.I would have preferred it if this debate had focused on what real business cycle theory -- whatever its limitations -- has to offer. For instance if you are postulating a "jobless recovery," most likely you are invoking ideas from real business cycle theory. RBC theory has been a major contribution, even if it doesn't explain the core of the recent financial crisis or even if it has some very limited one-person models. If you think seriously about the persistence of business cycles over time, or the spread of business cycles from one sector to another, probably you are invoking ideas from real business cycle theory. For all its prominence, Keynesian economics tends to portray states of affairs and it often has difficulty presenting a business cycle per se, such as the time paths of variables across the entire range of the cycle. RBC theorists have formalized what a cyclical explanation, in the full sense of that term, has to look like and so they have done a big service to Keynesian ideas also.At this point the debate is more a topic of sociology than substance. The substantive issues will be better worked through in other forums; this forum has been spoiled. The remaining lesson -- and perhaps the major lesson -- is that the Jacksonian mode of discourse does not very well suit a discussion of macroeconomic theory.In the comments I would say stick to the issues and don't bother criticizing any of the participants in the debate.

Don’t worry too much about the failings of the Austrian economists themselves, rather focus on what we can learn from them. That is the tack taken by Guillermo Calvo in a recent paper (pdf), here is one excerpt:

Paul Krugman asks a good question:And now as then, the whole notion [TC: what I call sectoral shift theories] falls apart when you ask why, say, a housing boom — which requires shifting resources into housing — doesn’t produce the same kind of unemployment as a housing bust that shifts resources out of housing.This of course was also Sraffa's 1932 critique of Hayek. I would cite a few points: